Telecommunication companies are facing serious financial challenges when it comes to setting up and maintaining cell towers, especially in rural areas. According to a report from GSMA, a global organization that represents telecom companies, these companies are spending about 35% more on average to operate in rural locations compared to cities.
The report, titled “Rural Renewal: Telcos and Sustainable Energy in Africa,” was released in November and highlights the economic difficulties of expanding network coverage in places where fewer people live. One of the main issues is that rural areas often have higher energy costs. Many of these areas do not have reliable access to electricity, so telecom companies frequently rely on diesel generators to power their base stations. This reliance on diesel is costly and can significantly increase their operating expenses.
The report states that running a base station in a remote rural area can cost between 35% to 40% more than in an urban area, and in some countries, this cost can be even higher. One of the reasons for this is that energy costs in rural areas can be steep because companies often have to use diesel fuel, which is expensive, especially when electricity from the grid is not available.
Another major expense for telecom companies in rural areas is backhaul infrastructure. This infrastructure is crucial for connecting rural base stations to the main network. The report found that the costs for backhaul in rural areas are 110% higher than in cities. This is largely due to the difficulty of laying fiber optic cables over long distances in sparsely populated regions.
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These combined costs of energy and backhaul infrastructure make it hard for telecom companies to make a profit in rural areas, which limits their ability to expand services in places that really need better connectivity.
For example, statistics show that telecom operators in Nigeria are spending over 50 million liters of diesel each month to keep their infrastructure running. This has led to a staggering monthly expense of around N71.3 billion (about $93 million) for major telecom companies like MTN and Airtel, amounting to a total of N570 billion (about $747 million) from January to August 2024.
In light of these challenges, many telecom companies are starting to explore renewable energy options like solar and wind power. This shift is aimed at reducing their operational costs and promoting more sustainable practices, especially in areas where relying on diesel is becoming too expensive.
For instance, Harmanpreet Dhillon, the Chief Technical Officer of Airtel Nigeria, mentioned that the company is working on improving grid connectivity and finding alternative energy solutions. He emphasized that connecting their base stations to the power grid is a top priority. By doing this, Airtel hopes to reduce its dependence on diesel generators, which will not only lower costs but also lessen their environmental impact.
Additionally, a senior executive from MTN, who chose to remain anonymous, revealed that the company spends over N30 billion (about $39 million) each month on diesel to power its approximately 25,000 base stations, highlighting the significant financial burden these energy costs place on telecom operators.
In summary, the high costs of energy and infrastructure in rural areas are major hurdles for telecom companies trying to expand their services. However, by investing in renewable energy and improving grid access, they hope to overcome these challenges and provide better connectivity to underserved communities.
